A Bit of Light: EPA to Release a Combined RVO

June 16, 2021

It is no secret that you have to be a little bit brave to be a participant in the Renewable Fuel Standard (RFS). For the past few years, it seems the RFS has been a hotbed of issues. However, there seems to be a little bit of light at the end of the tunnel. EPA is working to release the Renewable Volume Obligations (RVOs) for 2021 and 2022.

As most RFS participants know, RVOs help drive the production and demand for renewable fuel. If you don’t know what an RVO or obligated party is or why the RVOs are important, stop reading this and start reading Easy Peezy Lemon Squeezy: The Ins and Outs of the Renewable Volume Obligation. It will explain what those things are in a very simple way. #shamelessplug.

Every year, EPA is required to release the RVOs, so obligated parties have the ability to plan accordingly for the forthcoming year. Typically, EPA releases the forthcoming years’ RVOs in two phases. First, EPA releases the proposed RVOs, after they have faced review at the Office of Management and Budget (OMB), sometime in late June, early July. After those are released, EPA allows the industry to comment on whether they think those proposed volumes are reasonable. Following the comment period, EPA considers the feedback and finalizes the RVOs. The regulations require that EPA release the finalized RVOs by November 30 of the proceeding compliance year. So, for example, the RVOs for 2021 should have been released by November 30, 2020.

Like many things that were erased by the events of 2020, the RVOs for 2021 were never released. In May of 2020, EPA provided the 2021 RVOs to OMB…where they stayed for the remainder of 2020. Why the full stop? Well, there are several reasons for this. Between the issues arising out of a global pandemic, stay-at-home orders, and quarantine restrictions, the transportation industry saw a massive decline in demand, resulting in the need to severely temper supply. The drastic change in supply led to more uncertainty in an industry already not known for stability. While the fuels industry has been seeing a rapid rebound, we are 6 months into 2021 and EPA has yet to publish any sort of RVOs for the year. So, the million-dollar question is: what’s going to happen with the RVOs for 2021?

Rumor has it that EPA is going to release the RVOs for 2021 and 2022 at the same time. How will EPA go about accomplishing this? The mechanism by which EPA may go about completing this task is up for debate. Rather than focus on how this might happen, RFS participants can take heart by hearing that this is happening at all. While both sides of the fuels industry will have a different story of what has been happening, based on viewpoints and position in the RFS, I think its pretty safe to say that no one has been particularly pleased with events. EPA’s focus on getting RVOs out for 2021 and 2022, regardless of timing, is an encouraging change for many RFS participants.

What will these new volumes look like? That’s a pretty good question. Headlines from May stated that the gallons for 2021 and 2022 will be in line with those issued for 2020. EPA has said that the volumes are not likely to be increased as the industry is still recovering from the consequences of the COVID-19 pandemic. More recent headlines call that into question.

In any case, the fact that EPA is finally getting around to finalizing RVOs is a good sign for the RFS. Regardless of the mechanism EPA chooses to use, RFS participants are starting to get more certainty within the industry. After 2020 and the first part of 2021, giving the industry some stability and predictability is a welcome relief.